According to the latest data from Hulu, the company continues to grow at a spectacular pace. Hulu grew subscribers to 25 million in 2018, an increase of 8M from the previous year. As well, advertising revenue increased 45%, to reach $1.5 billion.

More content driving Hulu’s growth in every dimension

Hulu boosted its on-demand library to 85,000 episodes, including exclusive rights to every episode of shows such as ER, Lost, King of the Hill, Family Guy, and Bob’s Burgers. It also delivered marque originals including season 2 of The Handmaid’s Tale and the very successful Castle Rock.

The boost in content available through Hulu is also driving increased usage by subscribers. The company says the average time each month spent on Hulu per subscriber increased 20% during 2018. A lot of that time is spent binge watching. Hulu reports that over half of viewing sessions of the top 100 shows were of three or more episodes back-to-back.

Moreover, on-demand viewing appears to be Hulu’s sweet spot. Hulu Live subscribers, who have access to live TV channels and the on-demand catalog, spend half their viewing time watching on-demand. Nielsen says the average adult in Q2 2018 watched 3 hours and 59 minutes of live TV per day and only 32 minutes of time-shifted TV.

Breaking down Hulu’s subscriber base, it’s clear why the company is investing so much in on-demand content.

Subscription revenue remains king at Hulu in 2018

On-demand subscribers that have upgraded to ad-free service for an addition $4 a month

Customers of Hulu’s virtual MVPD service ‘Live’ paying a minimum of $39.99.

As a private company, Hulu does not regularly report on its performance. However, it does provide irregular guidance on progress. In May of 2018, Hulu said it had reached 20 million subscribers, an increase of 3M from the end of 2017. The latest news from the company says it now has 25 million total subscribers, an increase of 8 million from 2017.

The company has never been specific about the number of ad-free subscribers it has. Last year, company insiders said the “vast majority” of people that sign-up watch ads. They have also said it’s about 50-50, between ad-free and ad-watching subscriber. I have estimated the population of ad-free viewers in 2018 at 28%.

Hulu Live launched mid-2017. Just over a year later, in September 2018, the company confirmed that Live had the 1 million subscriber milestone, a gain of 200,000 subscribers over April 2018. Given that the fourth quarter has been strong for Netflix and other providers, Hulu Live likely finished the year with around 1.2 million subscribers.

This data allows nScreenMedia to estimate Hulu earned $2.7 billion in subscriber revenue in 2018. Total revenue was approximately $4.2 billion, up over 50% from 2017. 36% of revenue comes from ads and 54% from on-demand subscribers. Hulu Live is responsible for just 10% of total revenue. The revenue picture helps explain Hulu’s intense focus on on-demand viewing.

“Given the success of Hulu so far in terms of subscriber growth and the relative brand

Bob Iger, CEO Disney

strength and other things too like demographics, we think there’s an opportunity to increase investment in Hulu notably on the programming side.”

Mr. Iger even suggested international expansion could be in Hulu’s future, though this could be stretch. Most of Hulu’s television partners already have International distribution arrangements for their TV assets Hulu’s focus on U.S. television.

There are plenty of other challenges for Disney to overcome to continue Hulu’s success. However, at least one of them won’t be a lack of funding.

Why it matters

While Hulu continues to make a big loss, it continues to spend big on content.

The spending is driving a big increase in revenue, driven by subscriber rather than ad revenue.

Disney plans to continue the investment in Hulu when it assumes control later this year.